Название: Investment Strategies: A Practical Approach to Enhancing Investor ReturnsАвтор: Bill Jiang
Издательство: Palgrave Macmillan
Год: 2022
Страниц: 224
Язык: английский
Формат: pdf (true), epub
Размер: 11.5 MB
This book is a practical and unique investment resource designed to guide investors towards successful investing in the financial markets. It provides a selection of time-tested investment strategies to help investors enhance returns. Factor investing is positioned between active management and passive investing to combine their advantages. The book provides comprehensive coverage of common style factors such as quality and momentum in response to the rising investor interest in factor strategies. It presents a detailed description of the multifactor approach regarding its principle, investment merits and construction methods. The book also covers sustainable investing as it continues to rise in prominence across the investment sector. It employs an abundance of financial data, real cases and practical examples to help the audience understand different investment strategies in an interesting and informative way. The book is primarily written for private investors and investment practitioners such as equity analysts and investment advisors. It is also suitable for university students who are interested in learning practical investment strategies and traditional asset classes.
The investment landscape in the modern world continues to evolve in response to technological advances, regulatory requirements and changing market dynamics. Investment models and processes must continually adapt to changes in the increasingly complex and competitive investment environment. Successful investing relies heavily on effective and resilient investment strategies implemented against the backdrop of dynamic market conditions. Investment strategies play a central role in helping investors achieve defined financial objectives. They directly affect investment outcomes and become even more important in times of economic uncertainty and low return expectations across major asset classes.
Factor investing has attracted significant investor interest in recent years. This investment approach is positioned between active management and passive investing to combine their advantages. Factor investing seeks to outperform the market with lower investment costs than active strategies. It is designed to capture the return premiums of risk factors in a systematic and efficient way. Factor returns are cyclical in nature and susceptible to market conditions. To harvest factor premiums, some investors adopt factor rotation to actively change factor positions across different economic phases. However, it is practically difficult to detect turning points in the business cycle and reliably predict factor performance. The failure to capture strong factor returns can only result in disappointing investment performance. The emergence of multifactor strategies is a natural development in the evolution of factor investing. The multifactor approach essentially allows investors to gain balanced and consistent exposure to a combination of factors over time. It provides an effective solution to capture factor premiums and reduce portfolio volatility without the challenging task of factor timing.
Factors are systematic drivers of return and the foundation of investment portfolios. Academic and investment studies have identified a range of risk factors in equity investing. Common style factors include size, quality, momentum, value, yield, volatility and liquidity. These factors have proved the ability to generate excess returns over time. The size factor is related to the smallcap effect that smaller companies tend to outperform their larger peers in the long term. It is firmly established in the three-factor model developed by the Nobel Prize winner Eugene Fama and his research partner Professor Kenneth French. The quality factor captures excess returns delivered by companies with superior quality characteristics. Quality has been widely adopted in the investment sector either as a factor strategy or an element integrated into the investment process. Momentum reflects the observation that share price often continues to move in the direction of a price trend. The momentum strategy aims to produce excess returns by capitalising on established price trends in the market. The value effect refers to the tendency of stocks with attractive valuations to outperform the market over a long period of time.
Successful investing requires a clear understanding of fundamental investment principles, such as diversification and loss control. Diversification is a simple and effective strategy to mitigate investment risk. It controls exposure to any single asset to protect investment portfolios against disastrous losses in the uncertain market. Diversification reduces portfolio volatility and potentially improves risk-adjusted returns. Investors can construct diversified portfolios by allocating capital across different asset classes and risk factors.
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